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Markets "In a Nutshell"

Markets "in a Nutshell" for October 18, 2017

Oct 18, 2017

Quiz:

In the past year, the U.S. stock market has gone through one of the longest stretches of low volatility in history (meaning very little downs in stock prices). This has led some to fear a market crash as calm turns to fear. In what year did the U.S. stock market have its worse one day crash?

a. 1929

b. 1932

c. 1987

d. 2008

Answer is below…

Investment Week at a Glance

Stocks were up last week. The Dow Jones Industrial average gained 0.4%, the S&P 500 was up 0.2%, the New York Stock Exchange Composite (2,000 stocks) gained 0.3%%. The “average investor’s index” (Value Line index) rose 0.3%. Foreign stocks (DJ Global ex U.S.) were up 2.0% and bond prices (Barclays Aggregate Bond index) rose last week as the 10 year Treasury yield ended at 2.28%.

(Data sources: Barron’s Financial, Wall Street Journal)

Déjà Vu All Over Again as Stocks Climb and Volatility Stays Low

Economic data in the U.S. was better than expected last week, with initial jobless claims coming in lower than initially anticipated. Meanwhile, the number of people already collecting unemployment benefits fell to its lowest level since 1973.

Overseas, Japan posted strong results: Core machine orders in August grew much faster than expected. Data out of Europe was mixed, however. While industrial production in Germany and Italy was stronger than expected, it was below expectations in both France and the UK.

In the U.S. markets, technology was the top performer for the week on investor excitement over developments involving new applications for autonomous cars. Semiconductor stocks performed especially well. Meanwhile, falling yields (fueled in part by lower-than-expected inflation) helped utility stocks outperform. In contrast, U.S. energy stocks suffered the worst returns as oil prices moderated.

Wealthy retirees stick with stocks

Forbes magazine reports that wealthy retirees ($1 million plus in investment assets) are bucking the conventional wisdom that “older investors should be more conservative.” An old investment rule of thumb has investor’s stock allocation as 100 minus your age (so a 70 year old would have 30% in stocks). But Forbes, quoting a UBS report, found that retirees are keeping higher allocations in stocks (and have been rewarded for it). “Even people in their 80’s are maintaining high equity exposure,” says Sameer Aurora, who led UBS research team.

So should every 80 year old rush into stocks? Not necessarily. All investors still need to look at their own financial and investment condition to determine a proper allocation. But the UBS survey result does make sense given the 8 ½ year bull market we have experienced.

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